A recession so deep even teens are feeling the pain

They're still out there spending but a surprisingly large number are sales savvy

SKOKIE, Ill. (MarketWatch) -- Olivia Gann, 17, has become much more deliberate in her spending, looking to discounters for clothes or resorting to new accessories to update an outfit as the economy has hit her pocketbook as hard as it has consumers two and three times her age.

"I think a lot more about what I need versus just going in and thinking, 'Oh I like this,'" she said. "I buy a lot less of everything."

Her friend Alex Lock, 18, is on a similar spending path. "I found myself going to more thrift stores instead of the mall," she said. "I stick to the basics. I can alter old clothes so that I don't have to spend the money on them."

Gann and Lock were among the teens shopping earlier this week weekend at Westfield Malls' Old Orchard shopping center in this suburb north of Chicago.

This recession is the roughest teens have seen in their lifetimes. But having this effect on teens -- who have long spent freely no matter what's going on in the world -- underscores the depth and breadth of an economic slump that has left more than 6 million unemployed, a good percentage of whom are teenagers, and has shocked a spendthrift nation into becoming savers.

That doesn't mean teenagers have given up going to the malls and shopping centers or that every teen is pinching pennies. A Scarborough Research and Arbitron Inc. study recently found that 62% of teens tend to go to malls as often or even more often than they did six months ago.

And most of them are still spending liberally. Some 40% of teens said they ran through about the same amount of money at the malls on their last visit as they did on an average visit six months ago. Another 14% actually splurged more.

"Most teens recently report that they understand the economy is a concern, but they are still going to the mall, spending at the mall, mostly buying what they want and ready to increase their spending as conditions improve," said Jane Traub, senior vice president of research at Scarborough.

New economic awareness

But an unusually high 43% of teens said they spent less on their last visit, with more than half of those respondents noting that it was because they or their parents have less money to spend.

One in five mentioned the economy specifically.

Richard Hastings, consumer strategist at Global Hunter Securities, blames the shift -- considered seismic in some retail corners -- on the double whammy of persistently high gas prices from 2006 to 2008 -- prices that are on the rise again -- coupled with the sharp drop in teen employment, particularly at retail jobs.

Indeed, there is a 23.6% unemployment rate for 16 year olds to 19 year olds, a rate not seen since the early 1980s recessions and the 1991 recession -- before most were born. Overall, unemployment officially stands at 9.4%.

"The compound effect does not end with gas and retailing jobs," Hastings said. "Teens have seen a parent or both lose jobs, or they have heard of their friends suffering from these dislocations. And in many instances in housing-bubble areas like Phoenix and Las Vegas teens are seeing the forced migrations of friends because of foreclosures and employment issues."

The sales numbers at teen retailers tell the story, according to Sharon Zackfia, a retail analyst at William Blair. "Teen apparel sales (are) still under tremendous pressure with a clear skew toward value-oriented players," she said.

Take Abercrombie & Fitch.
ANF, +3.05%
The high-priced seller of hip casual clothes that teens have often aspired to has seen its sales drop for 13 straight months. In May, same-store sales, an important industry metric, plunged 28%.

Aeropostale
ARO, -10.53%
a significantly lower-priced venue for trendy casual clothes, turned in an impressive 19% same-store sales gain, while the overall teen-apparel category fell 9.7% for the month, according to Thomson Reuters.

Discounts matter

Olivia Gann said she shops at Old Navy
GPS, -0.08%
Target
TGT, +1.13%
and Forever 21, a teen apparel outlet famous for its bargains and wide assortment of girls' clothing.

"I don't shop very often in general and when I do it's in big hits," she said.

Pat Latuszek, 18, looks for discounts when he's shopping, which isn't often. "When there's a sale, I actually try to take advantage of it," he said. "I'll shop where I can find affordable clothing. If there's a sale, I'll walk into a Banana Republic or a Nordstrom."

The downtrodden economy also has crimped Latuszek's social life. "I've stopped eating out a lot," he said. "I've stopped going to movies too. I try to save money."

That hasn't been the case for Heena Dev, 16, who was shopping at the Westfield Mall here last week with her mother, sister and brother. Her brother carried the bigger bags -- four of them.

"We usually shop where we used to shop," she said. "If there's a sale at the store we go to, then that's great, but we don't shop differently."

She doesn't have an allowance or a job, but said she gets money from her parents whenever she needs it and shops with her mom. Recession or not, things have "basically stayed the same," Dev said.

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